PRO 19-09-2012_Layout 1 9/19/2012 2:02 AM Page 1
Wednesday,19 September,2012
Uncle Sam gives the dough, Maybe now the cash will flow US strategic reimbursements put current account balance in green zone g C/A balance shows $919m during first two months of FY13 g SBP says surplus due to $1.118b coalition support g Trade gap almost flat on $2.41b against last year’s $ 2.52 billion g Remittances grow by $ 57mn to $ 2.464bn from 2.407b of FY12 g
KARACHI
A
ISMAIL DILAWAR
FTER seeing a whole year of deficits the country’s current account balance set in the green zone registering a surplus of $ 919 million during the first two months of FY13, thanks to the long-denied war reimbursements made by the United States on account of Coalition Support Fund (CSF) early last month. In percentage terms, the surplus is 2.2 percent of the country’s gross domestic product (GDP) accounting for $ 41.116 billion. Syed Wasimuddin, the chief spokesman of the State Bank, attributed the rare surplus to inflows under coalition support. “(The surplus is) due to the CSF money”, he told Pakistan Today. Pakistan’s non-Nato allies in Washington had released to Islamabad on the first of last month $1.118 billion under the CSF after a months-long strain in bilateral ties was eased through an onand-off process of negotiations between the two countries on civilian, military and intelligence level. Economic observers also seconded the official version of the SBP spokesman saying the surplus was due to US funds transfer under the military and civilian heads of CSF
Dr Asim digs out more hope Says exploration companies have made significant oil and gas discoveries ISLAMABAD ONLINE
Dr. Asim Hussain, Minister for Petroleum & Natural Resources has expressed confidence that the new Petroleum policy 2012 provides significant incentives for Exploration and Production (E&P) Companies operating in Pakistan’s Oil and Gas sector. He said while addressing a meeting here on Tuesday that E&P companies should take advantage from the incentives offered in the new Policy. To reduce the prevailing demand and supply gap, the E&P companies have been successful in discovering new hydrocarbon reserves. Encouraged with the steps taken by the Ministry of Petroleum & Natural Resources to enhance indigenous production, E&P companies have made following discoveries during 2012. United Energy Pakistan Ltd has made discoveries in their Badin Blocks that include Gharo-1 Oil and Gas discovery in July, 2012 which is producing 520 Barrels of Oil per day (BOPD) and 0.03 Million Cubic Feet per Day (MMCFD) gas, Mohano-1 discovery in February, 2012 which is producing 300 BOPD and 0.03 MMCFD gas. Pir Apan-1 discovery made in March, 2012 producing 375 BOPD and 18 MMCFD gas, Piraro Deep-1 discovery made in April, 2012 which is producing 483 BOPD and 15.2 MMCFD gas, Nurpur Deep-1 gas discovery in May, 2012 producing 4.5 MMCFD gas, Mulaki-1 Oil and Gas discovery in July, 2012 which is producing 25 BOPD and 7 MMCFD gas, Shekhano-1 discovery made in August, 2012 that is producing 84 BOPD and around 17 MMCFD gas.
and Kerry Lugar Act (KLA), respectively. “Mainly that CSF and Kerry Lugar flow from the US,” said Khurram Schehzad, a senior analyst. The receipts under KLA have been meager with Washington reported to have transferred only Rs 20.356 billion during FY12 against a projected receipt of Rs 34.164 billion. Under the KLA, Pakistan has the US’s word for receiving a civilian aid of $ 7.5 billion till 2014, $ 1.5 billion per annum. However, the funds transfer under CSF augured well for the dollar-hungry Pakistan which in FY12 had braved a current account deficit of over $ 4 billion, pushing the economic managers closer once again to a fresh IMF bailout package. The central bank on Tuesday said during JulyAug FY13 the country’s current account stood at $ 919 million year-on-year compared to a deficit of $261 million during the corresponding months of FY12. A monthly account shows that against a $ 321 million deficit in July the C/A balance ended up in the green zone by witnessing a $1.240 bil-
lion surplus in August, when the CSF inflows landed in. With the country’s trade balance remaining almost flat by widening to a nominal $2.41 billion against last year’s $ 2.52 billion, the ever-increasing worker remittances might be a permanent attributable factor for the surplus. During the months under review, the central bank counted at $ 2.464 billion the remittances Pakistanis working abroad sent back home. This amount is up by $ 57 million than$ 2.407 billion overseas Pakistanis had remitted in the review months last year. The inflow of remittances during July and August was recorded at an impressive $1.205 billion and $ 1.259 billion, respectively. It means the country on average receives over a billion dollars every month from Pakistani compatriots. A break up of trade deficit depicts that during the two months the country exported goods worth $ 4.061 billion
compared to $ 4.257 billion of July-Aug of the last fiscal. Compared with last year’s $6.785 billion, the imports remained subdued at $ 6.471 billion. The disbursements from the foreign financers, another noteworthy indicator on the current account balance list, set in the red zone and remained confined to long-term project loans totaling at $ 81 million. Last year, the foreign disbursements under the same head had amounted to $ 172 million. The current account surplus also reflected well on the country’s booming stock market where, despite investors’ concern for an uncertain law and order situation in the protests-hit city, the KSE 100-share index ended higher and gained 118.5 points with trading volumes peaking to 129 million shares against Monday’s 98 million only. According to Ahsen Mehanti, a senior equity analyst and director at Arif Habib Securities, the surplus current account balance of $ 1.2 billion during August ‘12 along with factors like the new EU trade waiver on Pakistan exports, easing concerns on circular debt issue and speculations ahead of implementation of International Clearing House Mechanism for telecom sector played a catalyst role in bullish sentiments at the KSE on Tuesday.
Business Barometer – Gauging apprehension PIDE for effective policy to improve business activities ISLAMABAD STAFF REPORT
The business activity in Pakistan faces serious challenges as overall business activity in the country recorded very low ranking, says Pakistan Institute of Economic Development (PIDE). In its report ‘Business Barometer’ PIDE urged the government to adopt policies to improve business activities in the country. According to a press release issued here by PIDE, businesses continue to operate in a challenging environment with stagnant production and sales volumes, they remain somewhat optimistic about their future prospects. It said that firms that have performed well in terms of production, sales and exports attrib-
ute their success to strong demand for their products. Meanwhile firms experiencing sluggish business activity have blamed shortage of utility supplies as a major bottleneck hindering their performance. Surprisingly, however, energy shortage is not the top most constraint faced by the firms which may be due to alternative arrangements made by the firms to cope with the energy crisis. Even though firms are optimistic about economic revival majority of firms have no plans to enhance their productive capacity, the report said. Most of the businesses have reported increase in the prices during the first half of the year 2012 and expect them to increase in the second half of the year as well. However, they expect
the inflation to remain in single digits. A slight improvement in the permanent as well as the contractual employment shows little improvement in the labor market. The only significant change is observed in the textile sector where some firms laid off contractual employees. The laying off of contractual employees is consistent with the decline in the production and sales. On the other hand, slight improvement is expected in both the contractual and permanent employment statuses, especially in the sugar industry.Even though almost all the firms have reported to have a policy to increase wages once a year but not every industry is planning to increase wages. This implies that real wages are going to decline.
Saudis set to splash the cash Saudi Arabia to invest up to $1b in Pakistan ISLAMABAD ONLINE
The Chief Executive Officer(CEO) AlQarnain Group Eyad Al-Baaj has said that its group has planned to invest $ 400 million in the first couple of years and would increase this investment over one billion US$ in the coming 5 years. These funds would become part of the Foreign Direct investment in Pakistan. The group is interested to invest in the Energy, Building & Construction, Hotel & Hospitality and Auto Mobile Sector in Pakistan. Eyad Al-Baaj Al-Qarnain Group, of Saudi Arabia and Dr. M. Iqbal called on Chairman Board of Investment, Saleem H. Mandviwalla here on Tuesday to discuss the investment opportunities in various sectors of mutual interests of Saudi Arabia and Pakistan. ‘The AlBaaj Group is coming into joint venture with a Pakistani cement company Dandore. The current capacity of the Dandore Company is 350metric tons which will be enhanced up to 7500metric ton a day after this joint venture’, said by Mr. Eyad Al-Baaj The CEO of Al-Baaj Group further informed that “we are aware of the energy crisis in the Pakistan and our group is interested to construct IPPs with the production capacity of 150-200MW,”.
More money, more time Spain should seek aid, Greece needs more time to pay-IIF BEIJING AGENCIES
Greece should get cheaper rates on its 130 billion euro aid deal and at least two more years from the European Union and International Monetary Fund to repay them, the chief negotiator of the country’s private sector creditors said on Tuesday. But better terms could only come after Athens delivers on commitments it has made to fiscal reform, Charles Dallara, managing director of the Institute of International Finance (IIF), told a news conference while on a trip to Beijing. “Once that has been done, and I am confident it will be done, Europe and the IMF should move quickly to extend the adjustment period for at least two years and provide the modest additional financial support for that extension to be effective,” Dallara said. “Only some 15-20 billion euros is needed.
Pakistan, iMF to re-engage next week Meeting to be held next week in Dubai ISLAMABAD ONLINE
The first round of talks between Pakistan and International Monetary Fund (IMF) will start from September 25 in Dubai where Pakistan’s ability to pay back a remaining debt of approximately $6.4 billion will be reviewed. According to an official, during the week-long talks, an IMF team will arrive in Islamabad to hold policy-level dialogue. A significant part of the parleys will involve meetings with President Asif Ali Zardari and Prime Minister Raja Pervaiz Ashraf. The official said the amount received $1.18 billion in Coalition Support Fund (CSF) from the US had given some
space to the country’s economic trouble shooter to repay installments to the IMF on monthly bases. The official said more foreign inflows were expected in the coming months from other donors especially after improvement in relations with the US as it had also disbursed $280 million for the energy sector last month. The official said the country’s foreign exchange reserves will continue to face pressure due to re-payment of IMF loans in the next more than three years as Pakistan is likely to go to the International Monetary Fund (IMF) in fresh loan in current fiscal year 2012-13 to seek loan for the retirement of IMF’s Stand-by Arrangement (SBA) facility. “The economy of the country has
been badly hit by huge government borrowing, power and gas crisis and uncertain political and law and order situation, said an economic expert said. The burden of subsidies along with higher security-related expenditures exerted continuing pressure on the fiscal system and adjustment path was affected. Analysts however remained cautious, especially for the current fiscal year, saying the government may have to negotiate another loan programme with the Fund to ensure smooth repayment of the remaining installments to the IMF. Despite depressive economic situation of the country, the government had paid back total amount of $1.2 billion to International Monetary Fund during last fiscal year 2011-12 from foreign cur-
rency reserves held by the State Bank of Pakistan (SBP). According to the repayment schedule agreed between Pakistan and IMF, Pakistan will repay its obtain $7.6 billion to the IMF till the end of fiscal year 2014-15. The $11.3 billion SBA program had expired on September 30, 2011 and the last two trenches of $3.7 billion could not pay to Pakistan by IMF following Islamabad ’s failure to pursue key reforms as well as the emergence of the revenue figures fiasco. Pakistan had enter into a $11.3 billion programme in 2008 with IMF and got disbursements of about $7.6 billion, but failed to get the remaining $3.7 billion due to slippages in performance criteria, leading to suspension of the programme in May 2010 and was ended unsuccessfully on September 30,2011.